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1/3 of households in Japan on edge of bankruptcy: BOJ study

Astonishing but true: one-third of all Japanese households have “zero savings,” says Spa! (July 17-24), citing a 2017 Bank of Japan study.

Zero savings. You’re employed, not poor, maybe even rich – which is interesting, because a problem one naturally associates with poverty in fact goes far beyond it, for the simple reason that the more money you have the more you’re likely to spend, with scarcely a thought for tomorrow, until something happens – an illness, a pay cut, the birth of a child – and tomorrow, to all intents and purposes, is here, and you’ve nothing to meet it with.

You would expect savings to rise with maturity before maybe sinking with old age. Not so, says Spa! “Zero savings” afflicts people in their career prime – roughly the 30s and 40s – no less than in the early rising and late falling years.

It has vast ramifications. It affects how we educate our children and plan for our old age – if in fact we have leisure to plan for it, which many people don’t. One result is the rise of “old age bankruptcies” – among poor and rich alike.

Let’s look at cases. The names, naturally, are pseudonyms.

Koji Karashima, 42, earns 231,000 yen a month as a sheet metal worker. He, his wife and their two children, aged 8 and 6, live in a modest apartment in Saitama – rent: 47,000 yen a month. His wife’s part-time job earnings bring the family income up to 4.4 million a year. It’s tight. The apartment is nice and clean, but “we need more space.” All the same, “I gave up on owning a home a long time ago.”

The biggest expense is the kids’ education – 65,000 yen a month for juku and soccer school. The latter at least may seem a dispensable luxury, but “all their friends go; can they be the only ones who don’t?”

The couple’s main concern at this stage is to get both kids into college. You can’t do it – so the common belief runs – without juku.

And so they grind on, not in debt but not saving, hoping the precarious structure doesn’t crash, as they know it might if any emergency arises, even a relatively small one.

And old age? “I simply have no leisure to think about it,” says Karashima. “The way things are going there won’t be enough money for the kids’ college.”

He’s thinking of looking for a weekend part-time job – “but at 42, do I have the energy for it?”

Yukihiro Ogaki, 47, seem to be doing all right financially, he and his wife between them earning 9 million a year. Their two children are 14 and 11. The older boy attends a private high school. The younger boy is slated to as well. But even with just the one attending, education costs – school fees and extra-curricular lessons – eat up one-third of the family income. Perhaps private school is not strictly necessary – but Ogaki admits to having a “complex” in that connection. He works for pachinko parlor chain. The income is satisfactory but the social status is not, and “I want my children to do better.” Private school is seen as the road to that goal.

The kids’ classmates all seem to come from wealthier homes, and they set the pace. For example: lunch with her sons’ classmates’ mothers – an inescapable ritual – costs 1500 yen a meal. The others can spare it. Mrs. Ogaki can’t. But she can’t refuse either, or feels she can’t. And so, with one thing and another, the family ends up spending some 36,000 yen a month more than they take in. It can’t go on forever. But there’s no obvious way out.

Or maybe there is. Ogaki is having second thoughts about private school. He asks himself, “Is it really for the kids’ sake, or is it for my own ego?” He judges himself harshly. “Sometimes I wonder if I’m worthy to be a parent.” At some point he is clearly going to have to brace himself to bite a bullet. Which one?

July 29, 2018
06:19 pm JST

As in bank savings? Why would you put any money in a bank in Japan or pretty much anywhere in the West for that matter at present interest rates? Barely keeping up with inflation. You would have to be dumb to do so. Better off putting it index funds, retirement savings or even gold. Hiding it under the pillow as almost a better option.

In what country can you receive interest from a bank account that exceeds ir even matches inflation? I can answer that for you. No where. It doesn’t exist. To grow your money faster than inflation requires taking risk and you should not take risk with your emergency savings. Long term retirement savings yes, but “I need the money today to pay for my kids surgery” savings, no. As a Finacial Planner in the US, I see this a lot here. About half of Americans have zero saved for retirement and have less than $1k in the bank for emergencies, so they are one missed pay check from financial difficulties. Savings is all about discipline. We are a single income family and I make less than 6 figures, yet we own two homes and the one with a mortgage is rented and nets me $1k/month in income which more than covers the bills on my second home allowing me to max my retirement savings and save for another income property. We live a nice life, coming to Japan every summer, but we are miticulous about saving and watch what we spend. We rarely eat out, thus are able to save more. Saving money is mostly about discipline and if you are not saving at least 15%, then you are spending too much and need to rework your budget. It may not be easy, but it can be done.

July 29, 2018
06:18 pm JST

Thank you DenTok2009

It is often said over here that retirement is like a three legged stool, with the three legs being savings, pension, and social security. If Japanese have something similar to Social Security, then the statement that 1/3rd of all Japanese have "zero savings" gives a misleading impression, at least in regards to retirement.

July 29, 2018
11:22 am JST

July 28, 2018
06:37 pm JST

I confess to not knowing very much about Japan. So, this question/comment may be dumb......

Does Japan have anything like the Social Security system that some other countries have? Over here, anyone who gets a wage also has a percentage of their paycheck automatically go into a retirement account. The resultant retirement income is not a fortune by any means, but for most Americans it is enough to keep them from becoming homeless in retirement. The sad fact is that most Americans do not even try to plan for their retirement years, so the government forcing them to save can be a lifesaver.

July 28, 2018
04:41 pm JST

Depressing stuff, Japan is a great place but at the same time can be soul destroying, so we end up in & out of good & bad moods etc...…

Those with little ones I wish you the best, no kids here, for a number of reasons, but in hind sight I can see if we did it is highly likely we would be miserable most of the time & very likely divorced.

Sounds awful but I am really glad ended up without kids, it is so much work & the frustration it causes EVERYONE here & a lot of it so bloody unnecessary...….

Over the years I have sadly found that for most Japanese to be "happy" everyone around them MUST be sufficiently MISERABLE.

You want to really draw the ire of locals, just dare to show that you are enjoying life & many will hate you for it.

July 28, 2018
08:53 am JST

Ogaki is having second thoughts about private school. He asks himself, “Is it really for the kids’ sake, or is it for my own ego?”

I had this same issue with my ex-wife wanting to send my kids to a private high school and me to pay for it. I told her it was not necessary and only for her ego. She cut me off from seeing my kids (again).

There is a serious flaw in the Japanese public education system if kids have to attend private high schools and then go to a cram school (juku) in order to pass exams. What exactly are they teaching in public schools? Obviously, nothing!

So, one-third of families are teetering on bankruptcy, but there are still those who claim the Japanese economy is growing and Abenomics is working. Yeah, Abenomics is working, but only for a select few who are reaping the benefits of corporate tax cuts at the expense of workers on low salaries.

July 27, 2018
01:31 pm JST

savethegaijin,

An American stay at home mom facing the constant wrong-footed peril of mama-tomo savagery!? And a MIL nearby too! It makes me reach for the vodka bottle just hearing about it. I see moms dropping their kids off at the local elite kindergarten each morning, perfectly dressed and made up, faces stretched into horrifying masks of faux-glee and ingratiation, the shrill falsetto voices. Behind the facade, I'm convinced they'd like to kill one another with their parasols.

July 27, 2018
12:18 pm JST

July 27, 2018
12:14 pm JST

Sadly, this society is highly keep up with the Joneses. We must have or be able to do or go as the next person. To a degree I can see it’s value. However weening out of it it extremely difficult. Can anyone today NOT have a smartphone or iPhone or tablet at least, with WiFi ubiquitously available? You lose friends.

Rather than catering to the wealthy elite, gov’t needs to cater to the average Joe & Jane.

July 27, 2018
11:54 am JST

@Reckless

Yeah I had heard a lot about half kids and their parents having trouble at Japanese schools which is why I decided to put her in a private catholic school. I was really excited for the school when I found out there were several multi-racial children at the school but actually my daughter is the only child with a foreign mom (actually there is another girl with a Chinese mom but she gets treated much worse than I do), so the other moms still follow the Japanese social structure fairly strictly.

Sports clubs are probably a good idea. My daughter really wants to do gymnastics (which I did for most of my young life) but just the mention of it and my MIL throws on the hysterics about how dangerous it is so I wonder what sport outside of swimming that she would agree to lol

July 27, 2018
11:43 am JST

@jcjapan

You sound like a great father. Enjoy the moments you have with her, no man will ever be as important to a girl as her father. As someone who is still dealing with the loss of my own father, it really warms my heart to hear about all the good dads out there.

My husband (he's Japanese, we live in Tokyo) tries as hard as he can. He loves our daughter more than anything so whenever he gets free time (once a week if we're lucky) he takes her swimming, he plays dress up with her, he takes her out for daddy/daughter dates every week and never complains... She's so lucky. For the time being I'm a stay at home mom (which frankly, I hate) and since my career is more flexible (writing) than his, we decided that I would be the one to stay at home and look after her and keep an eye on his parents who are starting to get a bit old. I'm very fortunate that we have all of these comforts that allow me to stay home while my child(ren) are young but I never thought it would be as mentally taxing as it is. Hopefully when my daughter starts elementary school we can start all over with the social groups, but I imagine that will come with it's own problems.

I just wish there was more of a sense of group sympathy. It seems, especially from this article, that not everyone is doing that well here. From what I see at school, you would think all of these families have a perfect life, endless disposable income and no real struggling. I imagine it would be a great comfort if everyone could share their problems with one another and lean on each other for support instead of the constant one-upping and looking down on each other. Pipe dream, maybe. Sorry for the rant, summer always gets me down.

July 27, 2018
11:24 am JST

@savethegaijin: honestly sounds like you are dodging a bullet to avoid that group. My JP wife had a hard time with a half son in Osaka and a lot of discriminatory moms, but she started taking him to a free kendo club and made much stronger friendships. Now in Tokyo, she also has friends from the kendo club up here (tuition is free or 2,000 yen for such sports clubs in some areas). I also reckon if you invited a mother or two to an English lunch or tea, and added some friendly members little by little, many mothers would be interested. Wishing you the best of luck.

July 27, 2018
10:36 am JST

savethegaijinToday 09:01 am JST

Great post! Cool to hear a different perspective once in a while. I know what life is like my Japanese wife, a FT working mom but I literally can't fathom what it's like for an American mom. Not clear if you're stay at home or who you're married to but either way, a far different experience. Undoubtedly the peer pressure moms face is light years beyond what fathers face, if it can be said there are any expectations of us. I've always made it abundantly clear to friends and colleagues that my family is numero uno. That no I don't want to get blasted on every Friday night b/c come Saturday morning I'm taking my daughter hiking etc. The stares the first time you tell your boss such a thing, it just doesn't compute.

July 27, 2018
10:11 am JST

@Reckless

Thanks for the advice.

I mostly feel bad for my daughter because she has some good friends at that school but she doesn't get invited to the family outings because I don't want to go out and waste time and money several times a week eating out and spending 2 hours talking crap about other moms. Not to mention my poor husband who works like 14 hours and eats sometimes two meals at his desk everyday. I would feel like an absolute wench if I spent all my time free time at Ootoya while he was doing that. I imagine these women's husbands are in similar situations but apparently they don't care. It's hard enough being a parent here without feeling guilt or shame for things like that. Uhg.

July 27, 2018
09:43 am JST

July 27, 2018
09:01 am JST

I read a few months ago in a Japanese article that by age 30 you should have 3 years salary saved if you want to be able to retire at 65 modestly. It made me feel like complete crap. For a solid two months I had extreme anxiety about only having a few million yen saved at 31. Like it kept me up at night, made me feel like a failure. We already own a house but it didn't matter. We don't have any debt, but it didn't matter. I refuse to go on these stupid mommy outings, I teach my daughter piano and her grandmother is a swimming coach so she does these things for free... but it didn't matter. Even now I really want a second child but I feel like I just can't afford it and it makes me feel sick (literally) to think that I might pass my reproductive years without having another child to love and care for.

But why do I feel this way? All of my friends back in the States are completely crippled with student loan and medical debt. Their mortgages are sky high and daycare costs more than they'd ever thought it would be. I used to be in the same situation but I was far less worried about everything. Why?

Japan. Japan makes me feel this way. I'm extremely lucky in my circumstances and I never in my life thought I'd be in a position to say that, but the competition in this country is so suffocating sometimes that I have to take a step back and essentially slap myself back into reality. My home country has a lot of faults, like way too many to even count, and in so many ways Japan is infinitely better. But honestly in the States theres a better sense of collective struggling, even if people in Japan are struggling just as much. Back home if someone wants to do something extravagant and you say 'Heck no, I'm broke' or 'Nah I'm saving for suchandsuch', it's not a social deal breaker. You really can't say that in Japan without some backlash. I skipped out on two weeks of my kids private school mom lunches (at first because my father passed away and I went back home for his funeral), now they don't invite me. Not just don't invite me to lunch, don't invite me to anything. They don't talk to me at school events and I get a stank eye from several moms whenever I pick up my kid. It's easy to say that some of these parents in the article are overreacting about their children's activities but they're dead right. Japanese culture makes you feel like a piece of crap if you don't do the absolute best at every single moment. If you don't give 150% of yourself 100% of the time, you might as well have failed completely.

I love Japan and I love living here but this one point is literally unbearable. I don't have an answer either. It's just so depressing.

July 26, 2018
01:46 pm JST

As in bank savings? Why would you put any money in a bank in Japan or pretty much anywhere in the West for that matter at present interest rates? Barely keeping up with inflation. You would have to be dumb to do so. Better off putting it index funds, retirement savings or even gold. Hiding it under the pillow as almost a better option.

July 26, 2018
07:38 am JST

July 25, 2018
10:02 pm JST

Get rid of the car, switch to MVNO mobile phones, cut out the juku, stop eating out and you will save a fortune. My income is similar to the last example but I can save about half of it every year. All it takes is the will to resist buying rubbish you don't need.

The problem with specific advice is you don't know the specific situation of others. Maybe if the last example had no kids and wife who worked, he would be easily saving half as well. Likewise, some people need a car, and have decided on a juku for valid reasons. The example above doesn't mention spending money on rubbish. A lot of people with kids are struggling to get buy, and their answers are not so simple. A salary that is a fortune to single guy can seem a pittance for a guy supporting a family.

July 25, 2018
04:42 pm JST

The proportion of public financial support for higher education, such as universities, came to 34 percent in Japan, compared with the OECD average of 70 percent and the second-lowest after Britain’s 28 percent."

So what's the problem with lower pubic financial support. When parents would spend a small share of child support on capital building after their birth study financing is no problem.

July 25, 2018
04:04 pm JST

“all their friends go; can they be the only ones who don’t?”

Soccer, if kid loves it, sure! But it seems the kid goes because "all their friends go". Yeah, bad investment! Statistically speaking, only a very-very small percentage of kids who "love" soccer manage to grow up and become professional soccer players. In that context, it's more like gambling, quite effective at destroying your savings.

Juku is not needed, it's practically a class for coming up an answer for 32x78 in under 2 seconds. If you rely on Juku to educate your kids, they will be replaced by AI in the future.

65000yen a month, 780000yen a year, 7.8million in 10 years, that's your kid's college education there but you wasted it.

If you have decent income but no savings, you're really bad with statistics, chances, money and long-term planning.

July 25, 2018
12:49 pm JST

Get rid of the car, switch to MVNO mobile phones, cut out the juku, stop eating out and you will save a fortune. My income is similar to the last example but I can save about half of it every year. All it takes is the will to resist buying rubbish you don't need.

July 25, 2018
11:49 am JST

I've learned over the years that all such pseudo-alarmist/overgeneralized stories in the Japanese media need to be taken witha large grain of salt. Not that there are not a lot of people in dire financial straits - 16% of Japanese kids live in poverty, as do almost 50% of kids in single-parent homes - it's just that these "journalists" extrapolate a crisis from a couple of unrepresentative cases to keep the fear level stoked. Fearful people are easily manipulated.

July 25, 2018
11:05 am JST

Speaking of the cost of education, the driving factor is how stingy Japan is compared to the rest of the OECD. Last year they came in 32nd out of 33 countries in public spending on education. In other words, the burden disproportionately falls on parents.

"Japan ranked at the bottom of among 34 comparable Organization for Economic Cooperation and Development member countries in public spending on education in 2014, falling to the lowest position for the first time in two years, an OECD survey showed Tuesday. The proportion of public financial support for higher education, such as universities, came to 34 percent in Japan, compared with the OECD average of 70 percent and the second-lowest after Britain’s 28 percent."

July 25, 2018
10:52 am JST

I understand the spending on a good school and on the juku. It is seen as an investment in their children's future, and is not an unreasonable or frivolous expense.

That said, expenses in Japan can be ridiculous when compared to the wages people make these days. That needs to change. Until it does, these parents need to think outside the box. (I notice the second father already is questioning his choices, which is good.)

Juku is not needed to get into college, and it's highly questionable if college is the best way to go for everyone. "Spend money, go to a good school, attend juku, go to a good college, get a job for life where you can count on your wages rising as you gain seniority..." those days are ending. It's maybe not the best idea to live on the edge of insolvency just to live up to an antiquated ideal.

Things are not going to get better any time soon - I think they will get worse. People should do whatever they can to stay ahead of disaster, if that means working weekends, starting a side business and looking more critically at expenses and whether they are really worth it.

I found myself pretty well flat broke in my late 40s with a couple young kids and no options. It was scary (and something I never imagined could happen just a year earlier), and I did whatever I had to do. I didn't refuse anything, I wasn't too proud to do anything. I still have that attitude, because nobody knows what the future may bring. Almost everybody will at some point be hit with an unexpected financial burden. That's when living on the edge turns disastrous. I hope I never have to tell my kids they have to be hungry or they have to quit a school they love or we have to leave our home because daddy is broke. I know lots of people who had lots of money and thought they were set for life - until they weren't.

If one third of the country is living that way, it is very bad indeed. All it take is another economic crisis (which is almost assured at this point). It won't be pretty. It will be even worse in countries where people feel more entitled.

July 25, 2018
09:22 am JST

The headline is unnecessarily sensationalist, but yes, lots of people are only just getting by. And the majority of them won't be like the second example, a family clearly spending beyond their means on private education. If a "mama lunch" costing 1500 at a pasta restaurant is stressful in a way 800 yen at Gusto would not be, you can't afford private school. I am convinced some Japanese journalists just pick the first person they come across as examples for their stories, not people who actually illustrate the point they are trying to make.

The real frightening one is that in Japan you are automatically supposed to earn much more in your forties and fifties than in your thirties. The whole society is set up for this time-honoured model. Well, for lots of people, even people working as seishain, that is not happening any more. The sheet metal worker is already 42. Unless he changes something, he'll be on low wages for life.

July 25, 2018
06:40 am JST

Astonishing but true: one-third of all Japanese households have “zero savings,” says Spa! (July 17-24), citing a 2017 Bank of Japan study.

Alright, but where does that 'on edge of bankruptcy' comes from?

Zero savings. You’re employed, not poor, maybe even rich – which is interesting, because a problem one naturally associates with poverty in fact goes far beyond it, for the simple reason that the more money you have the more you’re likely to spend, with scarcely a thought for tomorrow, until something happens – an illness, a pay cut, the birth of a child – and tomorrow, to all intents and purposes, is here, and you’ve nothing to meet it with.

Many people in developed nations live like this, soooo?

You would expect savings to rise with maturity before maybe sinking with old age. Not so, says Spa! “Zero savings” afflicts people in their career prime – roughly the 30s and 40s – no less than in the early rising and late falling years.

Does the report says something about pension structure ?

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